Most home buyers can purchase a property with 5% down payment assuming they will be living in the property and it will be their principle residence. We help a lot of buyer purchase with 5% down and especially in Hawaii many of these buyers are 1st time home buyers. The process is not easy and can take on average around 3-5 offers before getting an offer accepted. Many times buyers are up against 1st time home buyers with larger down payment, investors with large down payment, and all-cash offers. Here are a few tips to consider when looking to buy a home with 5% down.

  1. Work with a good loan officer – Know exactly what you can qualify for and find out all of your options. Ask if you qualify for the Mortgage Credit Certificate (MCC), a program that gives 1st time home owners a tax credit equivalent to 20% of their annual mortgage interest.
  2. Be aggressive on move-in ready properties - It’s hard to find properties that don’t need any improvements. Move-in ready properties are very competitive and you will be sure to have competition from investors looking for a property they can rent out immediately without any work. All things being equal a seller will usually work with an offer with the highest down payment. Be aggressive up to your comfort level. Remember, the longer it takes to get into a property the more the market will appreciate and will cost you money.
  3. Consider properties that may need updating – Properties that are not move-in ready usually stay on the market longer and are less competitive. Look for properties that have been on the market for a while. You may need to replace the floors, paint, and update the kitchen and bathroom but everything can be done for the right price. Look at properties below your target budget and get quotes for the items you need to fix during your J-1 inspection period.
  4. Expand your search – Are you looking for a 2 bed / 2 bath / 2 parking condo in the heart of town for your first property? Once again these properties will be quite competitive. You may need to look outside your target area and compromise on some of your search criteria.
  5. Look for ways to become a stronger buyer – More down payment is the easiest way to make your offer look more attractive to the seller. Save or search for additional down payment such as gift funds. There are also ways to make your offer more attractive such as shortening inspection timeframes or deleting items such as cleaning which is typically a cost to the seller.